The relative roles of society and of the family as a source of support for the older population have changed over time with the decline of the extended family, increased migration, and the growth of governmental support programs. Moreover, as life expectancy increased dramatically over the last several decades, individuals are spending more of their later years in a relatively frail condition, with a declining support network from the traditional family. The transition from large stable families providing extensive support networks with older family members dying relatively young to smaller less closely knit families where older members live relatively long lives, has profound implications from the well-being of the elderly. The implications of this transition are made more imposing because we are fast approaching the time when the baby boom population enter their retirement years and must be supported by smaller cohorts. With rapidly rising costs of public health programs, the importance of the family as an alternative resource to sustain older people is increasingly recognized. If public policies are to be effective and the older members of society properly cared for, it is essential to understand the behavior of the family in the care they provide for their older relatives. Because medical care can be expensive, two primary concerns of the elderly--their finances and their health--are closely intertwined. The objective of this research is to obtain a better understanding of the roles of family and of society as providers of financial support and care for older persons when they encounter episodes of debilitating poor health. to accomplish this we draw upon perspectives from health policy, gerontology, demography and economic by incorporating the effects of health status into existing economic/demographic models concerning savings, bequests, and intergenerational and lateral transfers.